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Employer Size or Skill-Group Size Effect on Wages?

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  • Barth, Erling

    ()
    (Institute for Social Research, Oslo)

  • Dale-Olsen, Harald

    ()
    (Institute for Social Research, Oslo)

Abstract

It turns out that the employer-size effect on individual wages dwindles away once one control for the number of workers of the same skill-group (educational type) as the observed individual within the establishment. The skill-group size effect on wages is substantial. The main results, a dwindling employer size effect and a significant group size effect, remain after controlling for both individual and establishment specific heterogeneity. This observation rejects most of the proposed explanations for the employer-size effect, while it lends considerable support for the notion that there are frictions in the labor market and that each establishment faces an upward sloping supply curve for each type of labor.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1888.

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Length: 32 pages
Date of creation: Dec 2005
Date of revision:
Publication status: published in: Industrial and Labor Relations Review, 2011, 64(2), 341-355
Handle: RePEc:iza:izadps:dp1888

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Keywords: wage differentials; size wage effect;

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  1. Moene, Karl O, 1988. "Unions' Threats and Wage Determination," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 98(391), pages 471-83, June.
  2. Charles Brown & James L. Medoff, 1989. "The Employer Size-Wage Effect," NBER Working Papers 2870, National Bureau of Economic Research, Inc.
  3. Green, Francis & Machin, Stephen & Manning, Alan, 1996. "The Employer Size-Wage Effect: Can Dynamic Monopsony Provide an Explanation?," Oxford Economic Papers, Oxford University Press, vol. 48(3), pages 433-55, July.
  4. Hamermesh, Daniel S & Goldfarb, Robert S, 1970. "Manpower Programs in a Local Labor Market: A Theoretical Note," American Economic Review, American Economic Association, American Economic Association, vol. 60(4), pages 706-09, September.
  5. Barth, E. & Raaum, O. & Naylor, R., 1998. "Union Wage Effects: Does Membership Matter?," The Warwick Economics Research Paper Series (TWERPS), University of Warwick, Department of Economics 500, University of Warwick, Department of Economics.
  6. Albaek, Karsten & Arai, Mahmood & Asplund, Rita & Barth, Erling & Strojer Madsen, Erik, 1998. "Measuring wage effects of plant size," Labour Economics, Elsevier, Elsevier, vol. 5(4), pages 425-448, December.
  7. Dale Mortensen, 1984. "Job Search and Labor Market Analysis," Discussion Papers, Northwestern University, Center for Mathematical Studies in Economics and Management Science 594, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  8. Salop, S. C., 1973. "Wage differentials in a dynamic theory of the firm," Journal of Economic Theory, Elsevier, Elsevier, vol. 6(4), pages 321-344, August.
  9. Katz, Lawrence F. & Autor, David H., 1999. "Changes in the wage structure and earnings inequality," Handbook of Labor Economics, Elsevier, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 26, pages 1463-1555 Elsevier.
  10. Michael Kremer & Eric Maskin, 1996. "Wage Inequality and Segregation by Skill," NBER Working Papers 5718, National Bureau of Economic Research, Inc.
  11. Alan Manning, 1994. "Labour Markets with Company Wage Policies," CEP Discussion Papers, Centre for Economic Performance, LSE dp0214, Centre for Economic Performance, LSE.
  12. Kenneth Burdett & Dale T. Mortensen, 1989. "Equilibrium Wage Differentials and Employer Size," Discussion Papers, Northwestern University, Center for Mathematical Studies in Economics and Management Science 860, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  13. Burdett, Kenneth & Vishwanath, Tara, 1988. "Balanced Matching and Labor Market Equilibrium," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 96(5), pages 1048-65, October.
  14. Oi, Walter Y. & Idson, Todd L., 1999. "Firm size and wages," Handbook of Labor Economics, Elsevier, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 33, pages 2165-2214 Elsevier.
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